Assume the economy is operating in long-run equilibrium at the full-employment level of output. a.
Draw a correctly labeled aggregate demand and aggregate supply graph that represents this
scenario. (8 pts)
b. Suppose the economy experiences a change in consumer spending due to a sharp increase in
stock market indices and that this has increased the wealth of the nation. (4 pts)
a. i Amend the graph you drew for part (a) to show the results of the change.
b. ii Show the new equilibrium output and price level on your graph.
C. iii What type of gap exists in this economy?
d. iv Explain the effect of this change on the unemployment rate.
C. Recommend a fiscal policy action that could move the economy back to full-employment output.
(1 pt)
d. Explain the effect of the recommended fiscal policy action on (3 pts)
a. i Aggregate demand
b. ii The price level
C. iii The Real GDP

The market for corn in country a is highly competitive. at the current market price of $5/bushel there is a shortage of 100,000 bushels of corn in this country. media reports claim that the price of corn will rise drastically in the near future. according to these reports, the neighboring country b had witnessed a similar situation recently. at the same price, the shortage in country b was also 100,000 bushels and eventually the equilibrium price in b went up to $10/bushel. both countries are known to have equal number of corn producers and the market supply of corn is identical at all prices. this, combined with the fact that consumers in the two countries also have similar tastes and preferences, led the media to conclude that the price of corn in country a would soon be as high as $10/bushel. the new equilibrium price turns out to be below $10/bushel, what inferences can be drawn?

Suppose that electricity producers create a negative externality equal to $5 per unit. further suppose that the government imposes a $5 per-unit tax on the producers. what is the relationship between the after-tax equilibrium quantity and the socially optimal quantity of electricity to be produced?

Adamson company manufactures four lines of garden tools. as a result of an activity analysis, the accounting department has identified eight activity cost pools. each of the product lines is produced in large batches, with the whole plant devoted to one product at a time. classify each of the following activities or costs as either unit-level, batch-level, product-level, or facility-level. activities (a) machining parts. (b) product design. (c) plant maintenance. (d) machine setup. (e) assembling parts. (f) purchasing raw materials. (g) property taxes. (h) painting.